Investing in Real Estate


The real estate industry encompasses many branches and facets contributing to the

purchase, sale, exchange, ownership, and development of property. From a young

couple buying their first home, to an investor purchasing raw land for business

purposes, there are many aspects to the real estate market. Real estate investments

can be made directly by purchasing physical properties or indirectly through REITs

or pooled real estate investment funds. In either case, meticulous preparation is key

for success in the real estate market.


Real estate is considered to be a “hard” asset, meaning that it’s not easily

commoditized like stocks and bonds, and it tends to have a low correlation with

other significant asset classes. As such, it’s often viewed as an important diversifier

within a portfolio. In addition, real estate typically offers tax benefits and

competitive risk-adjusted returns.

Investing in real estate can be a great way to increase your wealth and provide for

future needs. However, it’s important to remember that investing in real estate is

not for everyone and should only make up a small portion of a portfolio. Before

diving in headfirst, it’s a good idea to take stock of your current financial situation

and discuss any plans with an experienced advisor.


There are five main categories of real estate: residential, commercial, industrial, raw

land, and special use. Each type of real estate has its own specialized market,

characteristics, and risks. Residential real estate includes single-family homes,

condos, and co-ops. Commercial real estate includes offices, retail, and industrial

facilities. Raw land includes vacant or undeveloped land, such as farmland and

forestland. Special use real estate refers to property used for public purposes, such

as parks and cemeteries.


The most important economic characteristic of real estate is location. This is

because people prefer some geographic areas over others, leading to varying values

for properties in different locations. Another aspect of real estate is immobility.

While one can move dirt and land, the placement of a particular parcel cannot be

changed. Finally, real estate is indestructible and permanent, and it’s unique in that

no two pieces of land are the same.

Aside from its hard and soft assets, real estate also consists of improvements made

to the land. This can include constructing buildings or other structures, bringing

water and electricity to the land, and even creating roads. These improvements

represent a sizeable fixed investment, and they can raise or lower the value of the

land. Furthermore, they can affect the property rights of neighbors and the



The real estate industry is comprised of a wide range of professionals who help to

facilitate the purchase, sale, and exchange of property. Real estate brokers and

agents are responsible for identifying suitable properties for buyers and sellers, and

they receive commissions for their services. Developers buy land and construct

buildings or other improvements, which they then sell or rent to end users. Finally,

lenders provide financing for real estate transactions. In order to become a broker or

agent, individuals must be members of the National Association of Realtors and

abide by their code of ethics.